Market Commentary | Year-End 2015

As 2015 winds to an end, investors are beginning to exhale. Finally, the Federal Reserve raised interest rates, important tax legislation passed (some good, some bad), the economic environment stubbornly continued to improve, and the markets eagerly look forward to the new year.

Fed Raises Rate
The influential event of the quarter was when Janet Yellen, Chair of the Federal Open Market Committee, announced that the Fed was raising the target range for the federal funds rate from a range of 0 to ¼ percent to ¼ to ½ percent. It had been almost a decade since the Federal Reserve last raised its interest rates.

This much anticipated event signaled the Federal Reserve’s confidence in the fact that economic activity continues to improve, albeit at a moderate pace. Citing positive trends in household spending, business fixed investment, an improving housing sector, ongoing job gains and declining unemployment, and an inflation rate that continues to run below the Committee’s 2 percent longer-term objective, the Committee expects future economic conditions to continue improving and expect gradual increases in the federal funds rate.

Of course, the federal funds rate was not the only rate to increase. Within hours banks, including J.P.Morgan Chase, Wells Fargo and Bank of America, started announcing increases in their Prime Rate, from 3.25% to 3.5%. Savings and deposit rates generally did not increase – as their changes typically lag.

Tax Legislation
Tax legislation also made front page news during the quarter. The first change involved Social Security claiming strategies for married couples’ combined benefits. The change is related to filing and suspension of benefits and generally applies to those who are not already using this strategy. The second change involved qualified charitable distributions from IRAs that would receive favorable tax treatment (with exceptions). The previously annually-approved allowances were made permanent.

The Trust Company believes that these fundamental fiscal events provide the type of background which is generally a positive event for investors. And while many global economies remain fragile, the overall direction of change can be viewed as a reason to be guardedly optimistic in 2016. Domestically, corporate balance sheets are healthier than they have been in a long time; the consumer’s balance sheet has dramatically improved since 2007; more people are working; we continue to lead the world in production and innovation; and inflation remains stubbornly low.

We remain committed to our belief that it is always important to work with your Advisor and team of professionals to discuss your tax planning, financial planning and your long-term investment objectives – including your return expectations and risk tolerance levels.

We continue to be honored by the number of referrals we receive from our clients. Please feel free to share this type of information with a family member, friend, or colleague if they would like to discover more about our services. As always we appreciate the opportunity to earn your trust and look forward to working with you in 2016.